Home Performance: Growing Exponentially in Uncertain Times

Neil B. Kelly was a farm kid with Irish roots who headed west during the Great Depression. Starting with a $100 investment, Neil and his wife, Arlene, built a nationally recognized remodeling business.

Today, Neil Kelly Company has five offices in the Pacific Northwest and three primary business divisions. The Design/Build Remodeling division provides a full range of design/build services, from new-home construction and whole-house remodeling to kitchen and bath projects. The Home Performance division assesses a home’s performance, using a building sciences approach to find ways to increase a home’s performance, energy efficiency, and comfort. And the Home Force division handles home improvement projects, from small handyman fixes to larger projects, such as window and door replacement. I started as the manager of the Neil Kelly Home Performance division in 2009.

Over the past 63 years, our company has weathered several economic downturns, with the latest proving to be especially challenging. Our revenues were declining sharply, and like many other builders, we were struggling to avoid staff cuts. And then our trajectory changed. While our traditional Design/Build and HomeForce divisions continue to be challenged by this economy, our Home Performance division is growing.

Now we are booking new-client appointments nearly three months out; we just set a new contractor record for winning the most National Association of the Remodeling Industry Contractor of the Year (CotY) design awards in a single year; and we had an amazing opportunity to take former Speaker of the House Nancy Pelosi on a tour of a client’s home featuring $20,000 of energy efficiency upgrades. The secret to our growth can be summed up in two words: home performance. Despite the economy, we are hiring staff and expect to double revenue this year for our Home Performance division. Several federal and state programs are helping to drive this growth by providing platforms andstandards for energy improvements. One of them is Home Performance with Energy Star (HPwES), a national program sponsored by EPA and DOE.

There is a synergy between our home performance and remodeling work that we are just beginning to explore. Neil Kelly has a reputation for being extremely high quality and we have traditionally served higher income individuals and families. Our Home Performance and Home Force divisions have allowed us to enter new markets and prove our value to an entirely new range of homeowners. Earlier in the year, we asked our remodeling designers and staff to recommend us to all their former clients; that helped to fill our pipeline. In appreciation for recommendations from the remodeling designers and staff, the Home Performance and Home Force staff now talk to their customers about all the remodeling services provided by Neil Kelly. We’ve brought in quite a few leads for the remodeling team and have completed several of those jobs to date. We will continue to look for ways to cross-market all that we have to offer and bring a wider range of services to the market.

Learning from Our History

Neil Kelly Company is known for its sustainable building practices. But we didn’t just jump on the home performance bandwagon. In fact, we started an ill-fated Weatherization division in the 1970s, fueled by the Carter administration’s tax credits for insulation, storm windows, and other energy upgrades. This earlier foray offers an important lesson. As company president Tom Kelly says, “Our weatherization business virtually dried up overnight when the tax incentives discontinued in the early 1980s. As we look to home performance, we have the opportunity to learn and to do things better this time around.”

Now we are working actively with federal and state agencies to ensure continued momentum and support. We are also driving consumer demand through our own innovative marketing and financing programs.

Federal and State Programs

Federal and state programs provide valuable incentives to help Americans green their homes. Here’s an overview of the programs we work with.

HPwES is a national program sponsored by EPA and DOE. The program is available in cities where a local sponsor (often a utility company) partners with Energy Star and helps recruit and train home improvement contractors to perform comprehensive home assessments based on whole-house building science.

The Energy Trust of Oregon (ETO) provides incentives to consumers to upgrade energy efficiency in their homes. The ETO is funded through utility consumers; each customer in the ETO territory pays a dedicated percentage of his or her bill to the ETO. The ETO invests that money back into the customer’s energy upgrades. In addition to these cash incentives, many homeowners also qualify for substantial tax credits for the upgrades.

Clean Energy Works Oregon (CEWO) was piloted with $20 million in American Recovery and Reinvestment Act funding. The pilot program was so incredibly successful that CEWO is now being launched statewide in Oregon. CEWO is a public-private alliance that enlists the help of utility companies, contractors, local lenders, local governments, the ETO, the Oregon Department of Energy, and DOE.

Putting It All Together

We do all of our audits using HPwES guidelines, and we use their logo on all of our marketing pieces. Energy Star is a very recognizable brand. ETO’s Home Performance group works closely with HPwES in directing training and advancing the industry. Additionally, ETO supports us with co-op marketing dollars and pays incentives to homeowners who install measures that we prescribe. They also are a source of leads for contractors who are trade allies. These co-op dollars help us get our messaging out and the incentives provide a sale-like experience for the homeowner. These incentives also provide valuable third-party credibility and help reassure homeowners that these measures are worth doing.

“Clean Energy Works Oregon makes energy efficiency affordable and easy,” says Derek Smith, CEO of CEWO. “We rely on our contractors—the best of the best in their field—to be our primary sales force. Neil Kelly is far and away the leader. They are the model for contractors looking to grow their businesses as the energy efficiency sector goes to scale.”

Spreading the Word: Marketing Is Key

Advertising can be expensive. That’s why remodelers should piggyback onto cooperative marketing programs to reach consumers more cost effectively. Neil Kelly Company participates in several cooperative campaigns with HPwES, the ETO, and trade allies that provide access to television, radio, print, e-mail, direct mail, online, and vehicle wrap programs (see “Increase Your Mileage”). These cooperative marketing campaigns educate consumers, fuel demand for green remodeling work, and perhaps most importantly, lend third-party credibility. Here are a few strategies that are driving new business leads.

“Friends and Family” E-mail

CEWO built in a great incentive for contractors to help spread the word. It assigned a unique identifier code to each approved contractor. To consumers, this instant rebate code means an opportunity for special savings. To contractors, it means that any new leads you generate will automatically be assigned to your organization. It also provides contractors with a great tracking tool. We used this special code as the basis of a “friends and family” e-mail campaign. We asked employees to forward an e-mail to their network friends, family, clients, and prospects alerting them to the new CEWO program and the great rebates available to make home energy upgrades.

The first week after this e-mail went out, 205 homeowners signed up for an audit. By the end of the month, the count jumped to 360. To date, with the help of this e-mail, as well as our other marketing activities, we’re scheduled to perform 625 audits, and our close ratio exceeds 80%.

Direct-Mail Postcard

We send a postcard to targeted neighborhoods (see Figure 1). This postcard informs readers that rebates will soon drop from $3,700 to $2,000, which provides a powerful motivator to take immediate action. Again, we include our unique contractor code.

We also send postcards to some of our clients’ immediate neighbors (see Figure 2). This one subtly reinforces a “Keeping up with the Joneses’” message. Instead of buying bigger cars or more expensive gadgets, we suggest that success is measured by your home’s energy efficiency, not by the price of your car.

Increase Your Mileage

Neil Kelly Company increases its mileage—adding advertising duties to its employee’s cars. We "wrap" an employee’s vehicle with advertising. It's voluntary, and employees can sign up for it. Neil Kelly pays for the wrap, as well for as its removal at the end of the program, and pays the employee a monthly stipend as well. Carpenters and insulators get $400 a month to wrap their truck or automobile. Sales staff, auditors, and project managers get $350–500 a month, depending on how eco-friendly their car is. A Prius would qualify for the highest stipend; a gas-guzzling clunker would qualify for the lowest. I drive a Jetta Sportwagon, and it qualifies for the highest, because it runs on biodiesel.

Print Advertisement

We focus our limited print advertising dollars on high-impact publications (see Figure 3). This ad ran in local shelter publications, as well as in the home section of a daily newspaper. We include the logos of our partners to leverage the positive brand equity associated with those organizations.

The Power of Public Relations

We’ve secured great television, newspaper, and online coverage by reaching out to the media. One thing we’ve learned is that local morning television personalities are always looking for something fun to do on-air. So we invited them to put on a hard hat and help conduct a home energy audit. We landed some great TV coverage, including one entire morning show segment (more than five minutes of air time), showing thousands of viewers the importance of making energy improvements.

We also ask reporters if they would like us to conduct an energy audit on their own home. This really appeals to sustainable-minded reporters, and it’s a great way to get them to learn about the program firsthand.

Finally, in a once-in-a-lifetime opportunity, we took former Speaker of the House Nancy Pelosi to a jobsite to visit the home of Peter and Heather Ficht, a young couple who made $20,000 worth of energy improvements, reducing their family’s energy costs—they have two young children—by 40%. This resulted in coverage in The Oregonian, Oregon’s largest daily newspaper, further spreading the word.

There is no doubt that marketing and public-relations efforts are driving our sales leads. To date, we have received 625 total leads from the CEWO program, we are booking home audit appointments three months out, and we are currently looking to hire three more auditors.

Lessons Learned

Our path hasn’t always been easy, and we’ve had some starts and stops along the way. Here are a few of the lessons we’ve learned.

Separate project management and sales functions as soon as possible. Which comes first—the clients or the staff? Growing your business with existing resources can be challenging. For a long time, I wore a “sales” hat and a “project manager” hat. This made it difficult to juggle the two and still remain focused. I would sell several jobs, act as project manager, and then my sales pipeline would begin to dry up. I couldn’t maintain the constant work flow needed to keep the rest of our team busy.

The solution? We took the financial plunge and hired more employees, so that we could separate the sales and project management functions. Each home performance team now consists of a project manager, a salesperson, and an auditor. We now have a more efficient sales process and make better use of other employees (such as carpenters). And sales have skyrocketed.

Get the right people in the right positions. One challenge that took us by surprise: Successful auditors have very specialized skills. At first, we expected to cross-train and redeploy existing employees. Many transitioned easily, but a few could not. We had several employees who were very technical and steeped in building science, but who struggled to communicate with consumers. The skill set required to be a great auditor is very different from the skill set required to be a great salesperson. It is critical to know the skills of your staff and where they best fit in your team. We have gone a step further and separated the sales role from the auditor role. That said, our sales staff are all BPI certified and understand building science.

Make the homeowner connection. A few early home audits were telling. In one, a busy professional raced home, quickly unlocked the front door, and raced back to his car, never looking up from his Blackberry. During another, the homeowner retreated to his home office and asked us to “just leave the report on the kitchen table” on our way out. Not surprisingly, neither of these homeowners decided to implement the recommended energy upgrades.

At a recent sales meeting, I likened a successful salesperson’s approach to that of a tour guide. When you walk in the door, it’s your chance to establish expectations and to build excitement. We encourage homeowners to walk through the audit with us, to ask a lot of questions, and to really learn about their home from a building science perspective. The result: Our close ratio is now in the 80s!

We ask probing questions about high utility bills, allergies, drafts, and rooms that always seem to be too hot or too cold. Home performance is all about consultative selling, and contractors who take this approach will be more successful.

Offer easy homeowner financing. The days of homeowners effortlessly pulling equity from their homes and banks rushing to provide credit are long gone. If homeowners are not willing, or able, to write a $6,000–$10,000 check for energy upgrades, they often do not know what to do.

Many are intrigued by energy efficiency programs but tend to shy away from implementing them because they don’t know how the lending and tax credit process works. We partner with local banks to be part of our audit review process and to explain the homeowner’s options in simple terms.

For example, we are currently partnering with a local bank in a program called Energize Southeast Portland (see Figure 4). We targeted a specific neighborhood where we plan to help homeowners reduce their energy bills by making energy retrofits. Homeowners are offered a free home energy audit (a $500 value). We evaluate their home inside and out to spot pesky energy drains, such as leaky ducts, inefficient equipment, poor insulation, and air leaks. We then walk the homeowner through the audit report, which includes recommended improvements, cost estimates, financing options, incentives, tax credits, and how much their carbon footprint will be reduced.

By packaging the assessment, the report, the recommendation, the incentives, and the financing, we take the guesswork out of the project for the homeowner. And if you help remove the confusion and educate consumers, they are much more likely to move forward with the project.

An Exciting Time

This is a very exciting time to be in the home performance business. People in the industry are energetic and passionate. I routinely get messages from my team well into the evening about an exciting new project or a great new product or process they’ve just heard about. It’s not an easy business, but there’s nothing like directly contributing to the efficiency, comfort, and longevity of most people’s largest investment—their home.

The energy incentive programs in place today are great vehicles that can help us travel down the road toward self-sufficiency. As building professionals, we see this as our chance, and our responsibility, to help create and cultivate this market.

Home performance will be around longer than weatherization was in the late 1970s, because energy costs have nowhere to go but up. If you are interested in home performance, then I encourage you to find great partners to help you market your services, remember always to make it easy for the homeowner, know your product, and remember to have fun helping to grow this industry!

Chad Ruhoffis manager of the Home Performance division at the Neil Kelly Company. Chad is a Certified Master Builder and BPI certified Building Analyst and Envelope Professional.

This article is part of a series sponsored by Home Performance with Energy Star, jointly managed by the U.S. Department of Energy and Environmental Protection Agency. The opinions, views, and ideas expressed within this article are those of the author and do not necessarily reflect the official policy or position of any agency of the U.S. government.

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